Cary v. United States

• Decision Date: 11 August 1927
• Citation: 22 F.2d 298
• Parties: CARY v. UNITED STATES.
• Court: U.S. District Court — Western District of New York

22 F.2d 298 (1927)

CARY v. UNITED STATES.

District Court, W. D. New York.

August 11, 1927.

Rann, Vaughan, Brown & Sturtevant, of Buffalo, N. Y. (J. Edmund Kelly, of Buffalo, N. Y., of counsel), for plaintiff.

Richard H. Templeton, U. S. Atty., and Richard A. Grimm, Asst. U. S. Atty., both of Buffalo, N. Y. (A. W. Gregg, General Counsel, Bureau of Internal Revenue and Wm. T. Sabine, Jr., Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for the United States.

HAZEL, District Judge.

When this case was before me last October (Cary v. U. S., 15 F.2d 602), the sole question presented was whether the legacy received by plaintiff's intestate from her father had not in fact lapsed, owing to the payment to him of certain matured securities, which he had bequeathed to her, and whether, after his death, the payment of the bequest by his executors to the legatee, his daughter, partly in cash or other securities, in lieu of the securities specified in the will, subjected the legatee to payment of an estate tax within five years of the payment of an estate tax by the testator. It was ruled by me that the legacy was not specific, had not lapsed, and, as the plaintiff, husband of the deceased legatee, erroneously paid the assessed tax to the collector, he was entitled to a return thereof.

A rehearing was subsequently granted, it being urged by the government that another question was involved, which had not been presented or passed upon viz. whether any of the securities owned by plaintiff's intestate at the time of her death can, under section 403 (a) (2) of the Revenue Act of 1921 (Comp. St. § 6336¾d), be identified as securities received from her father by bequest, or whether they were acquired by her by exchange for property so received, and upon which an estate tax had been paid by the testator, her father, within five years before his death. The government claims that, since it is shown that the securities, in the main, were acquired by plaintiff's intestate, in her lifetime, through purchase with securities or money received by her in lieu of the bequest, and in some instances were sold by her, the proceeds being used for purchase of other securities, they cannot, as stated in the act, "be identified as having been acquired in exchange for property so received," and, hence, that they were subject to the tax imposed.

A different conclusion, however, has been reached. The undisputed evidence fully shows that the securities bought by her, after the payment of the bequest, were acquired in exchange for property, securities, or money paid to her by the executors of her father's will. The findings of fact and conclusions of law approved by me make it unnecessary to set forth the details of the various purchases and sales. The law is well settled that in matters of taxation the subject of the transactions must be considered, that substance and not form is to be regarded, and, accordingly, the Revenue Act of 1921 must be given a reasonable construction. U. S. v. Phellis, 257 U. S. 156, 42 S. Ct. 63, 66 L. Ed. 180; U. S. v. Davison ...